"We're telling our employees we don't have enough money to pay for their salaries . . . we're cutting our staff," Commissioner George Bowman.
BIRMINGHAM, Alabama -- Jefferson County's outside legal costs topped $2 million in January - driven largely by its record setting bankruptcy filing - and show no signs of decreasing, an internal memo warns county officials.
The county paid $2,005,147 for outside legal work in January and "the cost of the work is rapidly increasing," says the memo written by County Attorney Jeff Sewell.
The memo went out to all five county commissioners and other county officials leading some to call for a closer review of the billings and other changes.
The legal costs include an annual pay increase that some outside lawyers charge the county every January. Those raises can be up to an additional $70 per hour.
No money for employees
"It is imperative that we get a handle on these legal fees," Commissioner Sandra Little Brown said.
"We're telling our employees we don't have enough money to pay for their salaries; we've put people on leave for financial reasons and we're cutting our staff," Commissioner George Bowman said. "And at the same time we're paying $2 million a month to our lawyers . . . that doesn't hold water."
The cost is an aberration, say some commissioners, and the county is paying for the best representation in a landmark bankruptcy case.
"Most months are not that," said Commissioner Jimmie Stephens, referring to the January legal expenses. "You have a level of expertise that's needed and necessary for the largest municipal bankruptcy in history. There's an old saying, 'You get what you pay for.' I think we're getting our money's worth."
A total of 24 outside lawyers work on the bankruptcy case and other litigation for the county including Chapter 9-expert Kenneth Klee, of Los Angeles-based Klee Tuchin Bogdanoff & Stern, whose hourly rate is $1,050.
"The lawyers for Jefferson County have to fight a war on three fronts," Klee said. "They're negotiating a plan (of reorganization); they're litigating in the bankruptcy court and they're litigating in the 11th Circuit (Court of Appeals)."
Bradley, Arant, Boult Cummings has 14 lawyers who represent the county in bankruptcy and other legal matters including Patrick Darby whose hourly rate is $576, which includes a $45 per hour increase he received in January, according to records.
Efforts to reach Darby for comment were unsuccessful.
Balch & Bingham has a total of six lawyers who mostly specialize in public finance for the county including Foster Clark and Hobson Presley, who earn $504 hourly, including a $69 per hour increase they received in January, according to documents.
"The outcome of this case is critical for the future of the county," Clark said in an emailed statement. "We and the county's other lawyers are doing everything we can to achieve the best result possible."
Costs could reach $25 million annually
County leaders predicted the county would spend $1 million a month in legal fees on bankruptcy. If the current trend continues the outside legal fees could reach $25 million per year if reductions are not made, according to the memo.
In January, the county's legal costs included $924,102 to the Klee firm; $840,222 to Bradley Arant and $155,467 to Balch & Bingham, according to records.
The money is being well spent, Commission President David Carrington said.
"I believe we're spending millions to save hundreds of millions," Carrington said. "We're in a war with the creditors. We are getting attacked from all sides. It's a tough situation. I understand it. But we have to get this behind us and we have one shot to do it right."
Over the past 12 months, the county has also paid $697,791 to Maynard Cooper and Gale on a federal consent decree case pending before U.S. District Judge Lynwood Smith.
County lawyers have said they tried to avoid that hearing by acknowledging areas of wrongdoing but the case went forward anyway and resulted in additional legal costs.
Bring legal work in-house
Some wonder if bringing portions of the legal work in house can reduce expenses.
"We need to equip our law department so that they will be able to handle more cases; we need to get them the tools they need so they can handle our cases," Brown said.
Sewell, who earns about $189 an hour when his annual salary of $393,750 is divided into the amount of hours he works, told commissioners during a committee meeting this month that his department was inadequately staffed. That results in "the county paying more than is necessary for legal services," he said.
"A significant portion of the legal work in the bankruptcy case is being performed by litigators, not bankruptcy lawyers . . . if adequate support staff existed in the county attorney's office, substantial portions of that work could have been performed by the county's in-house litigators and substantial expense could have been avoided," Sewell writes in the memo.
There are four lawyers in the county attorney's office and one administrative assistant. The budget for the department has decreased to $1.3 million for the fiscal year that began Oct. 1 from $3.1 million in 2009.
One experienced senior assistant county attorney retired three years ago and has not been replaced. The office does not have a legal secretary; paralegal or law clerk. The decrease in office staff has led to "substantial increases in the expense for outside legal counsel," according to the memo.
Commissioner Joe Knight, a lawyer, said, "I think we are deficient in the number of paralegals and secretaries we have" in the county attorney's office. "You can't run a law practice like that," he said.
Larger problems loom
Carrington said he agrees the office needs more personnel but said a larger problem looms.
"Do I think we need more attorneys internally? Absolutely. More than attorneys . . . we need support staff," he said. "I'm just as concerned about what happens when the flood gates open once we get out of Chapter 9."
Carrington said the county has to "muscle up" once the bankruptcy case concludes and the automatic stay is lifted that prevents legal action against the county while in Chapter 9.
"We surely don't want to have outside attorneys to handle that," Carrington said.
He believes the county could be out of bankruptcy by the end of year. Others aren't so sure.
On Thursday, county lawyers and creditors spent all day in front of Chief Bankruptcy Judge Thomas Bennett in the U.S. Bankruptcy Court for the Northern District of Alabama.
Next month, the adversaries will sit down with a federal appeals court mediator in Atlanta. In July, they are to appear before the U.S. 11th Circuit Court of Appeals.
"There is no doubt, with the size of this bankruptcy, with the historical significance of this bankruptcy, this will end up at the U.S. Supreme Court," Knight said.
These tables reflect hourly rates for county attorneys and payments to outside firms since October 2012.?
|HOURLY RATES OF JEFFERSON COUNTY ATTORNEYS||?|
|2013 Bradley Arant Boult Cummings - Hourly Rates||?|
|Joseph B. Mays Jr.||$495|
|Michael R. Pennington||$563|
|J. Patrick Darby||$576|
|Matthew H. Lembke||$491|
|Jay R. Bender||$495|
|Dylan C. Black||$450|
|Christopher L. Hawkins||$455|
|Jenny H. Henderson||$369|
|J. Thomas Richie||$315|
|2013 Balch & Bingham - Hourly Rates||?|
|J. Hobson Presley||$504|
|J. Foster Clark||$504|
|J. Thomas Longino||$315|
|2013 Klee, Tuchin, Bogdanoff & Stern - Hourly Rates||?|
|Kenneth N. Klee||$1,050|
|Lee R. Bogdanoff||$950|
|David M. Stern||$950|
|Whitman L. Holt||$530|
|2013 County Attorneys - Hourly Rates||?|
|Jeffrey M. Sewell||$189|
|Theodore A. Lawson, ll||$82|
|French A. McMillan||$61|
|Shawnna H. Smith||$48|
|Source: Jefferson County|
|October||November||December||January||Total by Firm|
|Klee, Tuchin, Bogdanoff & Stern||$439,598.63||$456,530.34||$369,723.86||$924,102.33||$2,189,955.16|
|Bradley Arant Boult Cummings||$684,663.45||$471,521.77||$509,819.65||$840,222.75||$2,506,227.62|
|Balch & Bingham||$118,215.11||$189,852.41||$107,099.56||$155,467.73||$570,634.81|
|Maynard, Cooper & Gale||$30,742.17||$75,296.69||$165,967.45||$85,354.32||$357,360.63|
|Total by Month||$1,273,219.36||$1,193,201.21||$1,152,610.52||$2,005,147.13||$5,624,178.22|
|Source: Jefferson County||?||?||?||?|